Is entrepreneurship on the rise in SD?

Serial entrepreneur Ray Hivoral believes entrepreneurship is on the rise in San Diego because of turnout to events like his inaugural Entrepreneur Night in September, which kicked off a two-day Entrepreneur Day event that drew 5,000 participants.
— Courtesy photo - Ray Hivoral

Serial entrepreneur Ray Hivoral believes entrepreneurship is on the rise in San Diego because of turnout to events like his inaugural Entrepreneur Night in September, which kicked off a two-day Entrepreneur Day event that drew 5,000 participants.
/ Courtesy photo - Ray Hivoral

National entrepreneurial activity is at its highest level since the Global Entrepreneurship Monitor began tracking it in 1999, but how does San Diego stack up?

San Diego is a long way from catching up to Silicon Valley. But while business name filings seem to indicate a dip in entrepreneurship, tech industry statistics and venture funding data paint a picture of a region establishing itself as a destination for people wanting to try new ideas.

The latest data from the regional CONNECT program, released in its 2012 Innovation Report, showed a 67 percent increase in software startups last year from the year before, with 230 created in the first three quarters alone, generating nearly 800 jobs with an average salary of about $112,000.

Those data are just for the technology and life sciences sectors. And while there's little other research quantifying activity to make new business ideas happen here, the amount of venture funding poured into the region is a good indicator, said Mark Cafferty, CEO of the San Diego Regional Economic Development Corporation.

San Diego companies from all sectors raked in $957 million in venture capital in the first three quarters of last year, according to a MoneyTree Report by Pricewaterhouse Coopers, ranking 10th among the 18 regions studied. In a more detailed report compiled by the Martin Prosperity Institute, San Diego ranked sixth among the top 20 locations for venture capital investment last year, with $1.1 billion funding 103 deals.

That accounted for about 4 percent of the total in VC funding for the 20 locations. Los Angeles was just ahead of San Diego, with $1.6 billion in venture funding for local firms, or 6 percent of the total. Meanwhile, companies in San Francisco and San Jose collected $6.9 billion, or about 26 percent of the total VC funding for 744 deals last year.

Aside from these disparate criteria, nobody is doing comprehensive measurements of San Diego's entrepreneurial community at large.

The closest comprehensive measure is the number of fictitious business names filed with the San Diego County Recorder's Office. Data from that office show that the number of new businesses has in fact dropped significantly since 2006, from 42,403 that year to 32,598 in 2012—a plunge of about 24 percent.

But people in and around the entrepreneurship community have anecdotes that they believe indicate more innovation is actually happening than ever before.

Serial entrepreneur and startup mentor Ray Hivoral says he sees an impressive amount of new business ideas in virtually every industry, from biotech to sports and fashion.

"We have an international airport, we have Mexico, we have the military, we have tech, biotech, craft beer and we have hospitality," he said. "So yes, there are a lot of entrepreneurs. There’s more of a movement than there was before. Even the colleges are pushing it more than before."

He gauges entrepreneurial activity among San Diegans based on their attendance at startup-related events. The events abound these days, with four Startup Weekends this year alone, the second annual Entrepreneur Day that drew 5,000 attendees in September and more recently, the 2013 World's Best Technologies Innovation Marketplace, which was held here this week.

Meanwhile, Hivoral's San Diego Entrepreneur meetup group has grown from 41 attendees in 2011 to more than 1,600 today.

Organizations like the Entrepreneur Center, CONNECT, SD Tech Founders and the San Diego Entrepreneurs Exchange, along with startup-related meetup groups, contribute to a climate that fosters self-employment, Hivoral said.

Star Hughes, a director at Hughes Marino, negotiates commercial leases on behalf of tenants wanting to move downtown, and she has seen a noticeable increase in startups seeking office space in the last year or two. Meanwhile, several coworking spaces, accelerators and incubators are popping up.

"There have been probably 10 tech startups come out of their homes just in the last three or four months," Hughes said. "Downtown has become a much more vibrant community in the past year or so because of how many tech startups have moved here. They constantly bring these great events, networking opportunities, and just a lot more life to these traditional high-rises that have been dominated by law firms and financial institutions."

Olivier Baudoux, founder of San Diego-based DrivAd, moved here from Santa Clara where he held executive-level positions with technology companies. He sees some encouraging signs that indicate an increased interest in innovation and entrepreneurship, he said, including a number of incubators and the CONNECT program, where he is a mentor.

Still, he is skeptical about how widespread entrepreneurial activity is in San Diego. Right now, the Silicon Valley veteran sees the area as a great place to live with a family, but not necessarily the best place to build a company.

"I think it’s such a long way from getting to where Silicon Valley is," Baudoux said. "It’s harder to find talent and very hard to find capital, especially if you’re not in bio or the pharma industry. A company like mine has to try very hard to get attention from VC investors. It’s hard for even me, who has worked for multibillion-dollar companies."

Both Baudoux and Hivoral believe more could be done to throw fuel on the fire of the entrepreneurial spirit here.

Hivoral suggests the city of San Diego offer up real estate in some of its blighted areas to serve as coworking space, a solution he believes would both create an economic stimulus in those difficult areas, and provide greater support for innovation.

Baudoux said that could be a game changer in pushing the local innovation economy forward.

"We need more coworking space in San Diego," Hivoral said. "It allows all the entrepreneurs to gather and meet, to work outside of their house and get out of their silos. When they feel like they're not alone, they're more motivated to take on the duty of becoming an entrepreneur and actually doing it instead of just thinking about it."